U.S. diplomats have been cautioned against using confidential government information to place bets on platforms that predict geopolitical outcomes, the Wall Street Journal reported on Thursday. The warning follows a series of investigations into unusually timed wagers and trades linked to Middle‑East tensions and other geopolitical events.
The State Department issued a memorandum to employees worldwide reiterating that exploiting undisclosed official information for personal financial gain constitutes a “very serious offense” that “will not be tolerated.” The directive specifically mentioned online prediction markets such as Kalshi and Polymarket, where users can bet on the outcome of international incidents, elections and diplomatic negotiations.
The alert arrives a week after a U.S. special‑forces soldier was arrested on charges of insider trading. Prosecutors allege the service member used classified intelligence to profit from bets placed before a U.S. raid that led to the removal of Venezuelan President Nicolás Maduro. The suspect, who has pleaded not guilty, is accused of earning more than $400,000 from those wagers.
Polymarket has come under heightened scrutiny for Iran‑related bets. Media reports indicate a cluster of accounts earned over $1 million by predicting a U.S.–Israel bombardment of Iran. Regulators are also examining whether similar activity has affected traditional financial markets. On Wednesday, a massive short position on crude oil was entered roughly an hour before a report of a possible U.S.–Iran peace deal, causing oil prices to tumble. Energy analysts described the trade as “suspicious,” noting it fits a pattern of pre‑emptive positions taken since the conflict escalated in late February.
The Justice Department and the Commodity Futures Trading Commission are reportedly reviewing at least four oil trades valued at more than $2.6 billion that were executed shortly before market‑moving statements from U.S. and Iranian officials. Investigators are assessing whether the timing of those trades suggests the use of non‑public information.
The controversy has also drawn attention to the Trump family’s connections with prediction‑market platforms. A January New York Times report disclosed that Donald Trump Jr. served as an advisor to both Polymarket and Kalshi and held an investment in Polymarket through his venture firm, 1789 Capital. When questioned, former President Donald Trump said he was “not happy with any of that stuff” and characterized the broader situation as “the whole world, unfortunately, has become somewhat of a casino.”
Regulators are expected to continue probing the alleged misuse of privileged information across both prediction markets and conventional commodities trading. The outcome of these inquiries could shape future policies on insider trading and the oversight of emerging wagering platforms that blend finance with geopolitical forecasting.
